In this paper we use rich panel data for a representative sample of Estonian enterprises to analyse
diverse issues related to the determinants of ownership structures and ownership changes after
privatisation. A key focus is to determine whether ownership changes are related to economic
efficiency. While employee owned firms are found to be much more prone than other firms to
switch ownership categories, often "employee owned" firms remain "insider-owned" as ownership
passes from current employees to managers and former employees. Logit analyses of the
determinants of ownership structures and ownership changes provides mixed support for several
hypotheses. As predicted: (i) wealth and resource constraints play a crucial role in the
determination of ownership, with foreigners buying firms with the highest equity levels and
insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent
ownership changes, especially away from employee ownership; (iii) allocation of ownership
depends on the pre-privatisation origin and location of the firm, and these factors also influence
subsequent ownership changes. Finally we compare our findings with those achieved by using
more conventional approaches to analyze efficiency that use very similar data. Reassuringly the
evidence presented in this paper is consistent with the view that efficiency considerations drive
ownership changes (while earlier analysis for Estonia and for many other transition economies has
identified the impact of ownership on economic performance.) However, the findings in this paper
also establish that there are important influences besides economic efficiency that affect enterprise
ownership and ownership changes.